Are there tips for avoiding a premature bankruptcy dismissal?

On behalf of Goldman & Beslow, LLC posted in Chapter 13 on Friday, September 11, 2015.

As we mentioned in last week’s post, a bankruptcy filing can provide immediate relief to debtors in the form of the automatic stay. That legal protection brings a halt to creditors’ collection efforts until after the bankruptcy court has issued certain rulings, depending on whether the filing was under Chapter 7 or Chapter 13.

However, a recent article reminds us that a positive outcome is not guaranteed simply by the act of filing. If applicable court procedures and/or other various filing or submission deadlines and hearings are not properly observed, a bankruptcy case might be dismissed. Cases can also be converted or closed.

The article alleges that the federal court system has acquired million of dollars from bankruptcy filings that were closed, converted or dismissed. In those filings, the debtors' funds apparently were unclaimed after the case disposition, and consequently remained in the courts’ possession. By one commentator’s estimate, the funds may total over $5 million across the country.

Although a dismissal and closing may sound like they achieve the same end result, there are differences. A closing typically reflects a status of completion, where the court ruled upon all pending motions and the bankruptcy trustee’s duties were completed. A dismissal, in contrast, may occur before completion of the main bankruptcy case. It can occur before a discharge order was entered, and may even occur without the debtor’s consent. For example, a creditor that opposes the proceeding may file a motion to dismiss and prevail in that request.

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